TIDMRMG
RAMBLER MEDIA LIMITED
CONDENSED CONSOLIDATED UNAUDITED INTERIM RESULTS
FOR THE 6 MONTHS ENDED 30 JUNE 2009
Rambler Media Limited (RMG.LN),("Rambler" or the "Group"),operating one of Russia's most popular internet brands, today announces its condensed consolidated unaudited financial results in accordance with International Financial Reporting Standards (IFRS) for the six months ended 30 June 2009.
FINANCIAL HIGHLIGHTS*
-- Consolidated total revenue down 18% year-on-year to RUR* 1,019 million
(US$ 30.8 million) (H1 2008, RUR 1,236 million / US$ 51.7 million) due
to macroeconomic turmoil and weak advertising demand in the period
-- Full year revenue projections down around 15% from 2008 revenue in
Roubles
-- Consolidated display / banner advertising revenue down 12% to RUR 432
million (US$ 13.1 million) (H1 2008, RUR 490 million / US$ 20.5
million)
-- Consolidated contextual revenue down 24% to RUR 419 million (US$12.7
million) (H1 2008, RUR 554 million / US$ 23.2 million)
-- Consolidated listings revenue down 15% to RUR 60 million (US$1.8
million) (H1 2008, RUR 71 million / US$ 2.9 million)
-- Consolidated EBITDA down 60% to RUR 85 million (US$ 2.6 million) (H1
2008, RUR 214 million / US$ 8.9 million) with an EBITDA margin of 8.4%
(H1 2008, 17.3%) due to adverse macroeconomic conditions since Q4 2008
and including one-off provisions for legal claims for RUR 19 million
-- Consolidated net loss after interest and tax of RUR 68 million (US$
2.1 million) (H1 2008, RUR 11 million loss / US$ 0.5 million loss)
including a RUR 70 mln amortization charge due the reclassification of
Begun (no longer classified as an asset held for sale)
-- CAPEX was RUR 19 million (US$ 0.6 million) (H1 2008, RUR 65 million /
US$ 2.7 million)
-- Strong balance sheet with cash position of RUR 772 million (US$ 24.7
million) and zero debt as at 30 June 2009. RUR 160 mln cash out in H1
due to payments for 2007-2008 expenses (sales and marketing and legal
costs associated with Google deal)
* To align the reporting currency with the predominant functional currency of the Group and simplify comparative performance analysis, the Group has decided to report both in Russian rouble and in US dollar. The USD/RUR exchange rate at the end of June 2009 was 31.29 and the average rate for the first half of 2009 was 33.07, the USD/RUR exchange rate at the end of June 2008 was 23.46 and the average rate for the first half of 2008 was 23.94.
Olga Turischeva, Chief Executive Officer of Rambler Media, commented:
"During the first half of 2009, the operating environment was particularly challenging for Rambler due to low business confidence, decreasing GDP and production in Russia and a prevailing lack of visibility which limited advertising spend across all sectors, as was the case in the last recession of 1998. While we are seeing early signs of stabilisation in the economy, including the stabilisation of the USD/RUR exchange rate, a recovery in the oil price and a rebound in the stock markets, we remain cautious on the outlook for the rest of the year and we now expect our full year revenue to be down around 15% year-on-year in 2009 in Rouble terms.
"Despite unfavourable market conditions, the internet continues to offer the strongest growth opportunities in the media sector. Online advertising has proven to be an extremely efficient way to reach Russian consumers offering a targeted and interactive approach. As a top internet brand in Russia, Rambler will continue to benefit from the growing internet penetration among Russian consumers, prolonged time spent online and greater overall involvement in internet activities. The traditional mix of media consumption is tangibly shifting towards the internet and thus the media mix in advertising campaigns is changing in favour of online advertising.
"Since joining Rambler in April, my objective has been to secure profitable growth for the group by revising our offering in the Russian internet landscape in order to increase our share of user reach and capture more advertising revenue. Our focus is to reverse the recent negative trends that have affected Rambler. What is obvious is that we need to reconsider the balance of our product portfolio, bearing in mind the needs of more active users spending increasingly more time online. Reallocating more effort to such services as communications and navigation is crucial. It is the key need of every online user and forms the core of our strategy to create an active and loyal audience. Although we remain committed to containing costs during this tough environment, I believe that we also need to continue to invest in innovation and to encourage new ideas and new projects that will attract new users to Rambler. My long term vision is to transform Rambler into an incubator of ideas and start ups - and our strong financial position means that we are well prepared to implement this strategy even in tough macroeconomic conditions. We intend to attract more talented young people to Rambler, and a new team is being formed now through which we plan to reinvigorate our corporate culture and revive our market leadership."
Rambler User Statistics
-- 16.2 millon new monthly unique users at Rambler (June '09 vs. '08,
Rambler statistics). Rambler reaching 51% monthly Runet users
accordning to TNS
-- 3.1 billion monthly page views on average in H1 2009, up 17%
year-on-year (2.96 billion in June 2009 vs. 2.45 billion in June 2008
representing a 10% increase).
-- Total search queries amounted to 1.15 billion in H1 2009
-- 60.8 million registered email accounts
Russian Internet / Advertising Market
-- Russian internet penetration up 15% year-on-year in H1 2009 to 37.5
million users. Internet penetration of 33%, still far behind mature
markets (source: Public Opinion Foundation).
-- Russian advertising forecast to be down as much as 24% year-on-year in
2009 to RUR 202 million (2008, RUB 267 million) (source:
ZenithOptimedia).
-- Demand in internet advertising forecast to be the most resilient of
all media segments (growth of 0 to 12% in 2009 according to Zenith
Optimedia) demonstrating that internet offers the strongest
opportunities for growth in the media sector.
-- Media mix changing in favor of online: 5.8% of ad market in '08 vs
7.5% expected in '09
FINANCIAL SUMMARY
RUR million USD '000s RUR million USD '000s
Jan - Jun Jan - Jun Jan - Jun Jan - Jun Jan - Dec Jan - Dec
2009 2008 2009 2008 2008 2008
Group 1,019 1,236 30,812 51,704 2,737 110,033
Revenue
Rambler 723 846 21,870 35,409 1,939 77,948
Media
excl.
Begun
Begun's 296 390 8,942 16,295 798 32,085
partner
network
Investment - - - - 3 106
income
Total 1,019 1,236 30,812 51,704 2,740 110,139
revenue
and
investment
income
EBITDA* 85 214 2,574 8,931 402 16,150
EBITDA 8.4 % 17.3% 8.4% 17.3% 14.7% 14.7%
margin**
Operating (98) (23) (2,975) (969) 95 3,804
(loss)
/ profit
Net (loss) (23) 18 (689) 756 77 3,570
/ profit
attributable
toequity
holders
of the
Group
(Loss) / (1.49) 1.17 (0.045) 0.049 5.00 0.232
earnings
per
share
fromcontinuing
operations
-
basic(RUR/US$
per share)
(Loss) / (1.49) 1.17 (0.045) 0.049 5.00 0.232
earnings
per
share
fromcontinuing
operations
-
diluted(RUR/US$
per share)
* Earnings before interest, tax, depreciation and amortisation
** Total EBITDA divided by total revenue.
Forward-looking statements
Certain statements in this half-yearly report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to be correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.
OTHER INFORMATION
The Group will host a conference call to present the results at 1 pm London Time (4 pm Moscow Time) today (26 August 2009).
To participate in the conference call, please register online at:
www.sharedvalue.net/ramblermedia/hy2009
The number for the conference call will be available upon registration.
For further information, please visit www.ramblermedia.com or contact:
Rambler Media Shared Value Limited
Konstantin Vorontsov Nicolas Duperrier
Marina Anisimova Mark Walter
Tel. +7 495 745 3619 Tel. +44 (0) 20 7321 5010
info@ramblermedia.com rambler@sharedvalue.net
ING Wholesale Banking
Daniel Friedman
Tel. +44 (0) 20 7767 1000
***
ABOUT RAMBLER MEDIA
Rambler Media is an internet media and services group which operates or has interests in leading Russian language internet brands including the Russian open portal 'Rambler.ru', on-line newspaper 'Lenta.ru', product comparison website 'Price.ru', internet catalogue and navigation system 'Top 100' and contextual advertising company 'Begun'. Rambler Media's shares are traded on AIM, the junior market of the London Stock Exchange under the symbol 'RMG'.
For more information on Rambler Media, visit our corporate website at www.ramblermedia.com.
Rambler Media Limited,
Condensed consolidated Unaudited half-yearly financial information,
30 June 2009
Contents
Interim management report
Balance sheet
Statement of comprehensive income
Statement of changes in equity
Cash flow statement
Notes to financial information
Statement of directors' responsibilities
Interim management report
Rambler Media is an internet media and services group which operates or has interests in leading Russian language internet brands including the Russian open portal 'Rambler.ru', on-line newspaper 'Lenta.ru', product comparison website 'Price.ru', internet catalogue and navigation system 'Top 100' and contextual advertising company 'Begun'. Rambler Media's shares are traded on AIM, the junior market of the London Stock Exchange under the symbol 'RMG'.
1. Highlights*
-- Consolidated total revenue down 18% year-on-year to RUR* 1,019 million
(US$ 30.8 million) (H1 2008, RUR 1,236 million / US$ 51.7 million) due
to macroeconomic turmoil and weak advertising demand in the period
-- Full year revenue 2009 projections down around 15% from 2008 revenue
in roubles
-- Consolidated display / banner advertising revenue down 12% to RUR 432
million (US$ 13.1 million) (H1 2008, RUR 490 million / US$ 20.5
million)
-- Consolidated contextual revenue down 24% to RUR 419 million (US$12.7
million) (H1 2008, RUR 554 million / US$ 23.2 million)
-- Consolidated listings revenue down 15% to RUR 60 million (US$1.8
million) (H1 2008, RUR 71 million / US$ 2.9 million)
-- Consolidated EBITDA down 60% to RUR 85 million (US$ 2.6 million) (H1
2008, RUR 214 million / US$ 8.9 million) with an EBITDA margin of 8.4%
(H1 2008, 17.3%) due to adverse macroeconomic conditions since Q4 2008
-- Consolidated net loss after interest and tax of RUR 68 million (US$
2.1 million) (H1 2008, RUR 11 million loss / US$ 0.5 million loss)
-- CAPEX was RUR 19 million (US$ 0.6 million) (H1 2008, RUR 65 million /
US$ 2.7 million)
-- Strong balance sheet with cash position of US$ 24.7 million and zero
debt at 30 June 2009
* To align the reporting currency with the predominant functional currency of the Group and simplify comparative performance analysis, the Group has decided to report both in Russian rouble and in US dollar. The USD/RUR exchange rate at the end of June 2009 was 31.29 and the average rate for the first half of 2009 was 33.07, the USD/RUR exchange rate at the end of June 2008 was 23.46 and the average rate for the first half of 2008 was 23.94.
2. Key Statistics
Rambler User Statistics
-- 51.5 million unique monthly visitors to Rambler.ru on average in the
period, up 38% year-on-year (H1 2008, 37.3 million). In June 2009,
Rambler reached 50.7 million unique users vs. 34.5 million in June
2008, representing 47% growth.
-- 3.1 billion monthly page views on average in H1 2009, up 17%
year-on-year (2.96 billion in June 2009 vs. 2.45 billion in June 2008
representing a 10% increase).
-- Total search queries amounted to 1.15 billion in H1 2009
-- 60.8 million registered email accounts
Russian Internet / Advertising Market
-- Russian internet penetration up 15% year-on-year in the first six
months of 2009 to 37.5 million internet users in Russia compared to
32.7 million in the same period last year (source: The Public Opinion
Foundation).
-- Russian advertising forecast to be down as much as 24% year-on-year in
2009 to RUB 202 million (2008, RUB 267 million) (source:
ZenithOptimedia).
-- Demand in internet advertising forecast to be the most resilient of
all media segments (growth of 0 to 12% in 2009 according to Zenith
Optimedia) demonstrating that internet offers the strongest
opportunities for growth in the media sector.
3. Performance
3.1. Financial Summary
RUR million USD '000s RUR million USD '000s
Jan - Jun Jan - Jun Jan - Jun Jan - Jun Jan - Dec Jan - Dec
2009 2008 2009 2008 2008 2008
Group 1,019 1,236 30,812 51,704 2,737 110,033
Revenue
Rambler 723 846 21,870 35,409 1,939 77,948
Media
excl.
Begun
Begun's 296 390 8,942 16,295 798 32,085
partner
network
Investment - - - - 3 106
income
Total 1,019 1,236 30,812 51,704 2,740 110,139
revenue
and
investment
income
EBITDA* 85 214 2,574 8,931 402 16,150
EBITDA 8.4 % 17.3% 8.4% 17.3% 14.7% 14.7%
margin**
Operating (98) (23) (2,975) (969) 95 3,804
(loss)
/
profit
Net (23) 18 (689) 756 77 3,570
(loss)
/
profit
attributable
to
equity
holders
of the
Group
(Loss) (1.49) 1.17 (0.045) 0.049 5.00 0.232
/
earnings
per
share
from
continuing
operations
- basic
(RUR/US$
per
share)
(Loss) (1.49) 1.17 (0.045) 0.049 5.00 0.232
/
earnings
per
share
from
continuing
operations
-
diluted
(RUR/US$
per
share)
* Earnings before interest, tax, depreciation and amortisation
** Total EBITDA divided by total revenue.
3.2. Half year review and outlook
The noticeable slowdown in global advertising spend across all sectors that has been observed in Russia since the fourth quarter of 2008 has prevailed during the first half of 2009. Despite some visible positive trends, such as the stabilisation of the stock markets and of the RUR/USD exchange rate as well as rising oil prices, the global economic situation remains uncertain. The Russian advertising market is forecast to decline by as much as 24% in 2009 (source: ZenithOptimedia, July 2009) halting the significant growth experienced in the market in recent years.
The Group estimates that demand in internet advertising will be the most resilient of all media segments, particularly in Russia where the number of internet users and the time they spend online continue to grow while penetration is still relatively low. Nonetheless, weak market conditions will have an impact on Rambler's operations and are likely to result in lower advertising revenue in 2009 than in 2008. As a result, the Directors of Rambler now estimate that 2009 revenue will be 15% down from 2008 revenue in rouble terms.
The Company is continuing to focus on optimizing costs to limit the impact of the current economic climate on Rambler's profitability. At the same time and with a new management in place, the Group is implementing strategic actions intended to accelerate its growth and improve its brands' appeal with the rising Russian internet audience. In April 2009, Ms. Olga Turischeva was appointed as Rambler's new Chief Executive Officer. Under her leadership, Rambler has undergone a review of its operations, from which new priorities have emerged including the need for the Company to re-evaluate its product offering and invest in key products, especially in the segments of navigation (search and catalogues) and communications (mail, messaging), and restructure its sales partnerships in an effort to increase revenues.
In the first half of 2009, Rambler continued to offer new products such as MyRambler and Mobile Rambler based on Netvibes' technology. Moreover, Rambler has recently announced a totally new communication platform called 'Virtus', introduced an updated e-mail service and some innovations in search. All of these developments contributed to make Rambler's websites some of the most frequently used in the Russian speaking community with over 51 million unique monthly users visiting Rambler.ru on average in the first six months of 2009.
3.2.1 Revenue
Although Rambler operates primarily in Russian roubles, the Group has, until now, been reporting exclusively in US dollars. Faced with the depreciation of the Russian currency and in order to provide followers with a clearer picture of Rambler's underlying performance, the Group will, from now on, be providing comparable data in Russian roubles.
The volume of sales for internet advertising is subject to certain seasonal fluctuations, and the first half of the year is typically lower than the second half due to holiday seasons.
Group revenues for the six months to 30 June 2009 were down 18% year-on-year to RUR 1,019 million (H1 2008, RUR 1,236 million), including RUR 296 million (H1 2008, RUR 390 million) from Begun's partner network. Begun partner network revenue is part of consolidated contextual revenue.
Group sales have suffered from the economic turmoil but also from increasing competition in the Russian internet landscape. This is due to a combination of factors such as the emergence of social networks and growing internet penetration resulting in the abundance of traffic on websites opposed to the shrinking marketing budgets which made competition even tougher.
Display / banner advertising revenue was down 12% to RUR 432 million (H1 2008, RUR 490 million), and represented 42% of the Group's total revenue (40% in H1 2008). Most of display advertising on Rambler's pages is sold through Video International Group's IMHO VI.
Contextual revenue, generated through the sale of search-related or text-based advertising on Rambler's and Begun's partner sites, was down 24% to RUR 419 million in H1 2009 (H1 2008, RUR 554 million), and represented 41% of the Group's total revenue (45% in H1 2008).
Other revenues attributable mainly to listing fees (Price comparison) and user generated payments such as mobile revenues (SMS) amounted to RUR 168 million (H1 2008, RUR 192 million), and represented 17% of the Group's total revenue (16% in H1 2008).
3.2.2. EBITDA
During the first half of 2009, the Group's consolidated EBITDA was down as a result of the prevailing weak market conditions and amounted to RUR 85 million (H1 2008, RUR 214 million).
The slowdown in sales activity halted the progress that the company had made in 2008. Rambler introduced a cost reduction programme in Q4 2008 and Q1 2009, which translated into higher restructuring costs but is intended to deliver benefits in the full year 2009.
3.2.3. Operating Expenses
The Group's operating expenses (including depreciation, amortisation and tax related provisions) reached RUR 1,121 million in H1 2009, slightly lower than a year ago (H1 2008, RUR 1,143 million), demonstrating that the Group was able to operate efficiently and responsibly.
Direct costs, including commissions, content, traffic acquisition costs, data centre costs and user generated payment costs have been reduced from RUR 428 million in H1 2008 to RUR 417 million in H1 2009. Commissions on banner sales are down from RUR 72 million in H1 2008 to RUR 68 million in H1 2009.
In H1 2009, the Group's labour costs continued to stabilise and account for 31% of total operating expenses and 34% of total revenues, compared to 32% and 30% respectively in H1 2008. Labour costs are down 5% to RUR 346 million (H1 2008, RUR 365 million).
The Group's results include provisions for potential tax related charges. These provisions relate to potential liabilities for taxes other than income tax, which arise from the legal structure of the Group and the jurisdictions in which various income and expense items are recognised and assessed. In H1 2009, the provision for potential tax-related charges amounted to approximately RUR 36 million (H1 2008, RUR 39 million).
Legal and professional fees went from RUR 31 million in H1 2008 to RUR 75 million in H1 2009.
The Group's amortisation expense went up by 84% from RUR 74 million in H1 2008 to RUR 136 million in H1 2009 and the Group's depreciation expense increased to RUR 47 million (H1 2008, RUR 40 million) due to reclassification of Begun from asset held for sale.
The Group's consolidated net loss from continuing operations after interest and tax was RUR 68 million in H1 2009 (H1 2008, RUR 11 million net loss).
The Group's basic loss per share from continuing operations in H1 2009 is US$ 0.045 (H1 2008, earnings of US$ 0.049).
3.2.4. Operating profit
The Group is reporting an operating loss of RUR 98 million in H1 2009 (H1 2008, RUR 23 million loss).
4. Cash position
The Group ended the period with cash balances of US$ 24.7 million (31 December 2008, US$29.0 million including US$4.1 in Begun classified as asset held for sale). The Group has no debt obligations.
5. Management and Board Changes
In the first half of 2009, Mark Opzoomer announced his decision to step down from his role as Chief Executive Officer and Executive Director. The Board recognised the need to review its structure and decision making processes in order to reshape and adapt them to new fast changing realities in Russia. As a result, in March 2009, Rambler announced significant changes to its board, which are detailed in the 2008 annual report. Julia Solovieva was appointed as Rambler's new Chairperson to succeed Robert Brown, and two new non-Executive independent Directors, Arthur Markaryan and Denis Frolov were appointed to succeed Nick Hynes and Ilya Oskolkov-Tsentsiper. Olga Turischeva was appointed as Rambler's new Chief Executive Officer and Executive Director on the Board from 16 April 2009. Nikita Serguienko stepped down from his position as Chief Financial Officer and Board Director on 21 May 2009.
6. Principal risks
Russian taxation and currency control regulations
A substantial part of the operations of the Group is conducted in Russia or involves transactions with Russian entities. As a result the Group has significant exposure to the Russian taxation and currency control regimes.
Russian tax and customs legislation is subject to varying interpretations, and changes, which can occur frequently. Management's interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by the relevant authorities.
The Russian tax authorities may be taking a more assertive position in their interpretation of the legislation and assessments, and it is possible that transactions and activities that have not been challenged in the past may be challenged. The Supreme Arbitration Court issued guidance to lower courts on reviewing tax cases providing a systemic roadmap for anti-avoidance claims, and it is possible that this will significantly increase the level and frequency of tax authorities' scrutiny.
As a result, significant additional taxes, penalties and interest may be assessed. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years preceding the year of review. Under certain circumstances reviews may cover longer periods.
Russian transfer pricing legislation introduced on 1 January 1999 provides the possibility for tax authorities to make transfer pricing adjustments and impose additional tax liabilities in respect of all controllable transactions, provided that the transaction price differs from the market price by more than 20%.
Controllable transactions include transactions with interdependent parties, as determined under the Russian Tax Code, all cross-border transactions (irrespective whether performed between related or unrelated parties), transactions where the price applied by a taxpayer differs by more than 20% from the price applied in similar transactions by the same taxpayer within a short period of time, and barter transactions. There is no formal guidance as to how these rules should be applied in practice. In the past, the arbitration court practice with this respect has been contradictory.
Tax liabilities arising from intercompany transactions are determined using actual transaction prices. It is possible with the evolution of the interpretation of the transfer pricing rules in the Russian Federation and the changes in the approach of the Russian tax authorities, that such transfer prices could potentially be challenged in the future. Given the brief nature of the current Russian transfer pricing rules, the impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial condition and/or the overall operations of the entity.
The Group includes companies incorporated outside of Russia. Russian tax laws do not provide detailed rules on taxation of foreign companies. It is possible that with the evolution of the interpretation of these rules and the changes in the approach of the Russian tax authorities, the non-taxable status of some or all of the foreign companies of the Group in Russia may be challenged. Where the Group believes that it is probable that its position could not be sustained, the related tax and associated balances have been accrued. However, it is possible that additional challenges may occur and the impact of such challenges, if any, cannot be reliably estimated; however, it may be significant to the financial condition and/or the overall operations of the entity.
Russian tax legislation does not provide definitive guidance in certain areas. From time to time, the Group adopts interpretations of such uncertain areas that reduce the overall tax rate of the Group. As noted above, such tax positions may come under heightened scrutiny as a result of recent developments in administrative and court practices; the impact of any challenge by the tax authorities cannot be reliably estimated; however, it may be significant to the financial condition and/or the overall operations of the entity.
Business risks
The Group's business risk is difficult to evaluate because the Group has a limited operating history in an emerging and rapidly evolving market. The Group derives nearly all of its net revenue from online advertising, which is a relatively new advertising medium. The Group's ability to succeed in this market may be restrained by limited resources, expenses, risks, and complications frequently encountered by similar companies in emerging and changing markets. To address these risks, the Group must, amongst other things:
-- maintain and increase the size of its audience;
-- maintain and increase its advertisers' base;
-- implement and successfully execute its business and marketing strategy;
-- continue to develop and upgrade its technology;
-- continually update and improve its service offerings and features;
-- find and integrate strategic transactions;
-- respond to industry and competitive developments; and
-- attract, retain, and motivate qualified personnel.
The Group may not be successful in addressing these risks, particularly as some of them are largely beyond its control. If the Group is unable to do so, its business, financial condition, and results of operations would be materially and adversely affected.
Directors believe in the long-term prospects of the internet and the advertising market in Russia. The underlying dynamics of more Russian consumers coming online and online users continuing to increase their media consumption via the internet, is set to continue.
Impact of the ongoing global financial and economic crisis.
The ongoing global financial and economic crisis that emerged out of the severe reduction in global liquidity which commenced in the middle of 2007 (often referred to as the "Credit Crunch") has resulted in, among other things, a lower level of capital market funding, lower liquidity levels across the banking sector, and, at times, higher interbank lending rates and very high volatility in stock markets. The uncertainties in the global financial markets have also led to failures of banks and other corporates and to bank rescues in the United States of America, Western Europe, Russia and elsewhere. The full extent of the impact of the ongoing global financial and economic crisis is proving to be difficult to anticipate or completely guard against.
Debtors of the Group may be adversely affected by the financial and economic environment, which could in turn impact their ability to repay the amounts owed. Deteriorating economic conditions for customers may also have an impact on management's cash flow forecasts and assessment of the impairment of financial and non-financial assets. To the extent that information is available, management has properly reflected revised estimates of expected future cash flows in its impairment assessments.
7. Forward-Looking Statements
Certain statements in this report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to be correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.
Rambler Media Limited
Condensed Consolidated Unaudited Interim Balance Sheet as at 30 June 2009
Notes 1H2009 2008 1H2009 2008
US$'000 US$'000 RURm RURm
Assets
Non Current Assets
Property, plant and equipment 5 4,882 5,311 153 156
Intangible assets 6 12,325 4,805 385 141
Goodwill 7 16,667 2,974 521 87
Investments in associates 8 354 504 11 15
Other non-current assets 9 1,044 29 33 1
Deferred income tax asset 1,665 673 52 20
36,937 14,296 1,155 420
Current Assets
Trade debtors 7,425 7,057 233 207
Prepayments 1,438 1,880 45 55
VAT receivable 692 335 22 10
Other receivables 607 589 19 18
Bank and cash balances 24,662 25,018 772 735
34,824 34,879 1,091 1,025
Non-current assets held for sale 20 - 34,658 - 1,018
Total assets 71,761 83,833 2,246 2,463
Liabilities
Current Liabilities
Trade and other creditors 9,060 11,872 283 349
Current income tax payable 5,999 1,894 188 55
VAT payable 1,769 1,117 55 33
Other provisions for liabilities 12 11,045 4,208 346 124
and charges
Deferred income 1,988 945 62 28
29,861 20,036 934 589
Long Term Liabilities
Deferred taxation 2,268 762 71 22
2,268 762 71 22
Liabilities directly associated 20 - 18,530 - 544
with assets held for sale
Total liabilities 32,129 39,328 1,005 1,155
Shareholders' equity
Issued capital 10 130 138 4 4
Share premium 50,247 53,514 1,572 1,572
Options reserve 196 189 7 6
Assets valuation reserve 758 807 24 24
Accumulated losses (7,813) (7,548) (313) (290)
Currency translation reserve (2,174) (2,315) - -
Total shareholders' equity 41,344 44,785 1,294 1,316
Minority interest directly - (308) - (9)
associated
with assets held for sale
Minority interest 15 (1,712) 28 (53) 1
Liabilities and Shareholders' 71,761 83,833 2,246 2,463
Equity:
The accompanying notes are an integral part of this condensed interim financial information.
These condensed interim financial statements were approved by the Directors on 7 August 2009
Olga Turisheva, CEO
Rambler Media Limited
Condensed Consolidated Unaudited Interim Statement of Comprehensive Income
for the 6 month period ended 30 June 2009
Notes 1H2009 1?2008 1H2009 1?2008
US$'000 US$'000 RURm RURm
Continuing Operations
Revenue 13 30,812 51,704 1,019 1,236
Operating expenses 14 (33,904) (47,815) (1,121) (1,143)
Impairment expenses - (5,145) - (123)
Share of profit of 8 117 287 4 7
an associate
Operating loss (2,975) (969) (98) (23)
Gain (loss) on disposal 18 123 (241) 4 (6)
of a subsidiary
Interest income 203 494 6 12
Loss before tax (2,649) (716) (88) (17)
Income tax benefit 16 595 259 20 6
Net loss (2,054) (457) (68) (11)
Other comprehensive
(loss)/income:
Currency translation (2,830) 1,427 - -
differences
Total comprehensive (4,884) 970 (68) (11)
(loss)/income
(Loss) / profit attributable
to:
- equity holders (689) 756 (23) 18
of the company
- minority interest 15 (1,365) (1,213) (45) (29)
(2,054) (457) (68) (11)
Total comprehensive
(loss)/income
attributable to:
- equity holders (3,458) 1,770 (23) 18
of the company
- minority interest (1,426) (800) (45) (29)
(4,884) 970 (68) (11)
(Loss) / earnings
per share for
profit/(loss) attributable
to the equity holders
of the company
(Loss)/ earnings
per share from
continuing operations
=- basic (in US$/RUR (0.045) 0.049 (1.49) 1.17
per share)
=- diluted (in US$/RUR 17 (0.045) 0.049 (1.49) 1.17
per share)
The accompanying notes are an integral part of this condensed interim financial information.
Rambler Media Limited
Condensed Consolidated Unaudited Interim Statement of Changes in Shareholders' Equity
for the 6 month period ended 30 June 2009
Issued Share Assets Options Accumulated Translation Total Minority Minority Total equity
capital premium valuation reserve Losses reserve interest interest
reserve directly
associated
with AHS
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
31 165 64,053 966 148 (13,315) (446) 51,571 1,876 4,747 58,194
December
2007
Profit/(loss) - - - - 756 - 756 - (1,213) (457)
for
the
period
Currency 8 2,973 45 7 (777) (1,242) 1,014 - 413 1,427
translation
Total 8 2,973 45 7 (21) (1,242) 1,770 - (800) 970
comprehensive
income
Share - - - 39 - - 39 - - 39
based
payment
charge
Classified - - - - - - - (490) 490 -
as
assets
held for
sale
Dividends - - - - - - - - (3,063) (3,063)
paid
30 June 173 67,026 1,011 194 (13,336) (1,688) 53,380 1,386 1,374 56,140
2008
Profit/(loss) - - - - 2,813 - 2,813 - 925 3,738
for
the
period
Currency (35) (13,512) (204) (44) 2,975 (627) (11,447) (308) (88) (11,843)
translation
Total (35) (13,512) (204) (44) 5,788 (627) (8,634) (308) 837 (8,105)
comprehensive
income
Share - - - 39 - - 39 - - 39
based
payment
charge
Classified - - - - - - - (1,386) 1,386 -
as
assets
held for
sale
Acquisition - - - - - - - - (1,245) (1,245)
of
minority
interest
Disposal - - - - - - - - (64) (64)
of
subsidiary
Dividends - - - - - - - - (2,260) (2,260)
paid
31 138 53,514 807 189 (7,548) (2,315) 44,785 (308) 28 44,505
December
2008
Profit/(loss) - - - - (689) - (689) - (1,365) (2,054)
for
the
period
Currency (8) (3,267) (49) (10) 424 141 (2,769) - (61) (2,830)
translation
Total (8) (3,267) (49) (10) (265) 141 (3,458) - (1,426) (4,884)
comprehensive
income
Share - - - 17 - - 17 - - 17
based
payment
charge
Disposal - - - - - - - - (6) (6)
of
subsidiary
Declassified - - - - - - - 308 (308) -
from
assets
held for
sale
30 June 130 50,247 758 196 (7,813) (2,174) 41,344 - (1,712) 39,632
2009
Rambler Media Limited
Condensed Consolidated Unaudited Interim Statement of Changes in Shareholders' Equity
for the 6 month period ended 30 June 2009
Issued Share Assets valuation Options Accumulated Total Minority Minority interest Total equity
capital premium reserve reserve Losses interest
directlyassociated
with AHS
RURm RURm RURm RURm RURm RURm RURm RURm RURm
31 December 4 1,572 24 4 (367) 1,237 46 117 1,400
2007
Profit/(loss) - - - - 18 18 - (29) (11)
for
the period
Total - - - - 18 18 - (29) (11)
comprehensive
income
Share based - - - 1 - 1 - - 1
payment
charge
Classified - - - - - - (13) 13 -
as assets
held for sale
Dividends paid - - - - - - - (69) (69)
30 June 2008 4 1,572 24 5 (349) 1,256 33 32 1,321
Profit/(loss) - - - - 59 59 - 21 9
for
the period
Total - - - - 59 59 - 21 80
comprehensive
income
Share based - - - 1 - 1 - - 1
payment
charge
Classified - - - - - - (42) 42 -
as assets
held for sale
Acquisition of - - - - - - - (30) (30)
minority
interest
Disposal of - - - - - - - (2) (2)
subsidiary
Dividends paid - - - - - - - (62) (62)
31 December 4 1,572 24 6 (290) 1,316 (9) 1 1,308
2008
Profit/(loss) - - - - (23) (23) - (45) (68)
for
the period
Total - - - - (23) (23) - (45) (68)
comprehensive
income
Share based - - - 1 - 1 - - 1
payment
charge
Declassified - - - - - - 9 (9) -
from assets
held for sale
30 June 2009 4 1,572 24 7 (313) 1,294 - (53) 1,241
Rambler Media Limited
Condensed Consolidated Unaudited Interim Statement of Cash Flows
for the 6 month period ended 30 June 2009
1H2009 1?2008 1H2009 1?2008
US$'000 US$'000 RURm RURm
Cash flows from operating activities
Net loss (2,054) (457) (68) (11)
Adjusted for:
Interest income (203) (494) (6) (12)
Share of profit of associates (117) (287) (4) (7)
Income tax benefit (595) (259) (20) (6)
Impairment expenses - 5,145 - 123
Cost of share options vested 17 39 1 1
Foreign currency translation (1,305) 753 (43) 18
(gain) loss
Depreciation and amortisation 5,549 4,755 183 114
Increase in provision for taxes 1,100 1,646 36 39
other than income tax
Gain on disposal or sales of (113) - (4) -
assets and investments
Operating cash flows before 2,279 10,841 75 259
working capital changes
(Increase) / decrease in (459) 1,685 (15) 40
debtors and receivables
(Increase) / decrease in prepayments (39) (56) (1) (1)
(Decrease) / increase in creditors (5,324) 592 (177) 14
and other payables
Increase / (decrease) 280 (1,884) 9 (45)
in deferred income
Cash (used in) / generated (3,263) 11,178 (109) 267
from operations
Income taxes paid (189) (3,544) (6) (84)
Net cash (used in) / generated (3,452) 7,634 (115) 183
from operating activities
Cash flows from investing activities
Sale of subsidiary undertakings 50 110 2 3
Dividend income 228 - 8 -
Purchase of property, (234) (2,123) (8) (51)
plant and equipment
Purchase of intangibles assets (336) (585) (11) (14)
Net cash used in investing activities (292) (2,598) (9) (62)
Cash flows from financing activities
Dividends paid (787) - (26) -
Interest received 187 427 6 10
Net cash (used in) / from (600) 427 (20) 10
investing activities
Net (decrease) / increase in cash (4,344) 5,463 (144) 131
Exchange (loss) gain (87) - 61 (39)
Cash at the beginning of the period 25,018 31,462 735 772
- continuing operations
Cash at the beginning of the 4,075 1 120 -
year - assets held for sale
Cash at the end of the period 24,662 26,075 772 610
- continuing operations
Cash at the end of the year - 10,851 - 254
- asset held for sale
Cash at the end of the period 24,662 36,926 772 864
Notes to the condensed consolidated unaudited half-yearly interim financial information
1.General Information
Rambler Media Limited ("the company") was incorporated in Jersey on 10 June 2004 as a private limited company (now a public company - see below). The company has its registered office at First Island House, Peter Street, St. Helier, Jersey JE2 4SP. The condensed consolidated financial information presented herein includes the condensed interim financial information of the company, its wholly owned subsidiaries and investees in which the parent company has control (together referred to as "the Group").
The Group's principal place of business is the Russian Federation and CIS.
Rambler Media is a diversified Russian language media, entertainment, services and content delivery company which operates various internet properties including the leading Russian language internet portal and search engine "Rambler.ru", Top 100 rating system, free email service, on-line newspaper "Lenta.ru", price comparison website "Price.ru", data center operator "Rambler Telecom" and contextual advertising company "Begun".
Rambler Media's shares are traded on the AIM market of the London Stock Exchange under the symbol "RMG" since the Initial Public Offering (IPO) which took place on 15 June 2005.
At 30 June 2009, the Rambler Group had 605 employees in continuing operations (31 December 2008: 660; 30 June 2008: 700).
On 31 October 2006 Prof-Media, a Russian media holding, acquired 48.8% of the shares of Rambler Media Limited from funds managed by FM Asset Management Limited. In December 2006, following the anti-monopoly approval, Prof-Media obtained control of Rambler Media Limited. Subsequently, Prof-Media (the "PM Group") increased its stake to 54.84%. The immediate controlling party of the PM Group is KM Technologies (Overseas) Limited. In 2008 Mr V.Potanin completed the acquisition of Mr M.Prokhorov`s stake in the company controlling KM Technologies (Overseas) Limited, and subsequently became the sole ultimate controlling party of the PM Group and Rambler.
2.Basis of preparation
This condensed consolidated interim financial information for the half-year ended 30 June 2009 has been prepared in accordance with IAS 34 "Interim financial reporting". The interim condensed financial report should be read in conjunction with the annual financial statements for the year ended 31 December 2008.
The accounting policies adopted are consistent with those of the annual consolidated financial statements for the year ended 31 December 2008, as described in the annual consolidated financial statements for the year ended 31 December 2008.
3.Accounting policies
a) Basis of consolidation
These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") under the historical cost convention. The principal accounting policies applied in the preparation of these condensed consolidated interim financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated (refer to Note 3 (e), New Accounting Pronouncements).
b) Functional currency
Management exercised its judgement to determine that for the purposes of the 2009 IFRS financial statements the Russian Rouble most fairly represents the economic effects of the underlying transactions, events and conditions.
c) Presentation currency
All amounts in these financial statements are presented in thousands of US dollars ("US$ thousands") and in millions of Russian Roubles ("RURm"), unless otherwise stated. It is a common practice for Russian companies operating in the media industry to use US$ as a presentation currency, however faced with depreciation of the Russian Rouble and in order to provide a more evident picture of the Group's underlying performance, the management made a decision to present corresponding data in Russian Roubles.
The Russian Rouble is not a fully convertible currency outside the Russian Federation and, accordingly, any translation of RUR denominated assets and liabilities into US$ for the purpose of these condensed consolidated interim financial statements does not imply that Group could or will in the future realise or settle in US$ the translated values of these assets and liabilities.
The results and financial position of each Group entity (functional currency of none of which is a currency of a hyperinflationary economy) are translated into the presentation currency as follows:
(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
(iii) all resulting exchange differences are recognised as a separate component of equity.
At 30 June 2009, the principal rate of exchange used for translating foreign currency balances was US$ 1 = RR 31.29 (31 December 2008: US$ 1 = RR 29.38).
d) Foreign currency translation
Monetary assets and liabilities are translated into each entity's functional currency at the official exchange rate of the Central Bank of the Russian Federation at the respective balance sheet dates. Foreign exchange gains and losses resulting from the settlement of the transactions and from the translation of monetary assets and liabilities into each entity's functional currency at year-end official exchange rates of the Central Bank of the Russian Federation are recognised in profit or loss. Translation at year-end rates does not apply to non-monetary items, including equity investments. Effects of exchange rate changes on the fair value of equity securities are recorded as part of the fair value gain or loss.
e) New accounting pronouncements
Certain new IFRSs became effective for the Group from 1 January 2009. Listed below are those new or amended standards or interpretations which are or in the future could be relevant to the Group's operations and the nature of their impact on the Group's accounting policies. All changes in accounting policies were applied unless otherwise described below.
The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2009:
IAS 1, Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009). The main change in IAS 1 is the replacement of the income statement by a statement of comprehensive income which will also include all non-owner changes in equity, such as the revaluation of available-for-sale financial assets. Alternatively, entities will be allowed to present two statements: a separate income statement and a statement of comprehensive income. The revised IAS 1 also introduces a requirement to present a statement of financial position (balance sheet) at the beginning of the earliest comparative period whenever the entity restates comparatives due to reclassifications, changes in accounting policies, or corrections of errors.
IFRS 8, Operating Segments (effective for annual periods beginning on or after 1 January 2009). The standard applies to entities whose debt or equity instruments are traded in a public market or that file, or are in the process of filing, their financial statements with a regulatory organisation for the purpose of issuing any class of instruments in a public market. IFRS 8 requires an entity to report financial and descriptive information about its operating segments and specifies how an entity should report such information.
The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2009 but are not currently relevant for the group:
IAS 23 (amendment), 'Borrowing costs';
IFRS 2 (amendment), 'Share-based payment';
IAS 32 (amendment), 'Financial instruments: Presentation'.
IFRIC 13, 'Customer loyalty programmes'.
IFRIC 15, 'Agreements for the construction of real estate'.
IFRIC 16, 'Hedges of a net investment in a foreign operation'.
IAS 39 (amendment), 'Financial instruments: Recognition and measurement'.
The following new standards, amendments to standards and interpretations have been issued but are not effective for the financial year beginning 1 January 2009 and have not been early adopted:
IAS 27, Consolidated and Separate Financial Statements (revised January 2008; effective for annual periods beginning on or after 1 July 2009). The revised IAS 27 will require an entity to attribute total comprehensive income to the owners of the parent and to the non-controlling interests (previously "minority interests") even if this results in the non-controlling interests having a deficit balance (the current standard requires the excess losses to be allocated to the owners of the parent in most cases). The revised standard specifies that changes in a parent's ownership interest in a subsidiary that do not result in the loss of control must be accounted for as equity transactions. It also specifies how an entity should measure any gain or loss arising on the loss of control of a subsidiary. At the date when control is lost, any investment retained in the former subsidiary will have to be measured at its fair value. The Group is currently assessing the impact of the amended standard on its consolidated financial statements.
IFRS 3, Business Combinations (revised January 2008; effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009). The revised IFRS 3 will allow entities to choose to measure non-controlling interests using the existing IFRS 3 method (proportionate share of the acquiree's identifiable net assets) or on the same basis as US GAAP (at fair value). The revised IFRS 3 is more detailed in providing guidance on the application of the purchase method to business combinations. The requirement to measure at fair value every asset and liability at each step in a step acquisition for the purposes of calculating a portion of goodwill has been removed. Instead, goodwill will be measured as the difference at acquisition date between the fair value of any investment in the business held before the acquisition, the consideration transferred and the net assets acquired. Acquisition-related costs will be accounted for separately from the business combination and therefore recognised as expenses rather than included in goodwill. An acquirer will have to recognise at the acquisition date a liability for any contingent purchase consideration. Changes in the value of that liability after the acquisition date will be recognised in accordance with other applicable IFRSs, as appropriate, rather than by adjusting goodwill. The revised IFRS 3 brings into its scope business combinations involving only mutual entities and business combinations achieved by contract alone. The Group is currently assessing the impact of the amended standard on its consolidated financial statements.
IFRIC 17, Distribution of Non-Cash Assets to Owners (effective for annual periods beginning on or after 1 July 2009). The amendment clarifies when and how distribution of non-cash assets as dividends to the owners should be recognised. An entity should measure a liability to distribute non-cash assets as a dividend to its owners at the fair value of the assets to be distributed. A gain or loss on disposal of the distributed non-cash assets will be recognised in profit or loss when the entity settles the dividend payable. The Group is currently assessing the impact of the new interpretation on its financial statements.
IFRIC 18, Transfers of Assets from Customers (effective for annual periods beginning on or after 1 July 2009).The interpretation clarifies the accounting for transfers of assets from customers, namely, the circumstances in which the definition of an asset is met; the recognition of the asset and the measurement of its cost on initial recognition; the identification of the separately identifiable services (one or more services in exchange for the transferred asset); the recognition of revenue, and the accounting for transfers of cash from customers. IFRIC 18 is not expected to have any impact on the Group's financial statements.
Unless otherwise described above, the new standards and interpretations are not expected to significantly affect the Group's consolidated financial statements.
4.Segmental Information
The chief operational decision-maker has been identified as the Board of Directors. The Board reviews the group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.
The Board considers the business from product perspective:
Display and Value-Added Services ("VAS") - display advertising, mainly on rambler.ru and lenta.ru, and consumer fee-based services, mainly mobile and internet content
Context - paid search advertising on rambler.ru and context advertising offerings on websites from Begun partner's network
Listings - consumer listings-based services on price.ru
As the Group's business is conducted largely in a single geographical market, Russia and CIS, no geographical analysis is given.
The Board assesses the performance of the operating segments based on a measure of adjusted earnings before tax, gain(loss) on disposal of a subsidiary, interest income, impairment expense, depreciation and amortization (EBITDA).
The segmental results for the six months ended 30 June 2009 were as follows:
Display&VAS Context Listings Total
US$'000 US$'000 US$'000 US$'000
Total Revenue (from external 16,348 12,659 1,805 30,812
customers)
Adjusted EBITDA 605 1,455 514 2,574
Total assets 39,722 26,409 5,630 71,761
RURm RURm RURm RURm
Total Revenue (from external 540 419 60 1,019
customers)
Adjusted EBITDA 20 48 17 85
Total assets 1,244 826 176 2,246
The segmental results for the six months ended 30 June 2008 were as follows:
Display&VAS Context Listings Total
US$'000 US$'000 US$'000 US$'000
Total Revenue (from external 25,527 23,195 2,982 51,704
customers)
Adjusted EBITDA 1,377 6,936 618 8,931
Total assets 48,637 48,176 5,802 102,615
RURm RURm RURm RURm
Total Revenue (from external 611 554 71 1,236
customers)
Adjusted EBITDA 33 166 15 214
Total assets 1,138 1,128 136 2,402
A reconciliation of total adjusted EBITDA to total loss before tax is provided as follows:
1H2009 1H2008 1H2009 1H2008
=--------------------------------------------------------------------------
US$'000 US$'000 RURm RURm
=--------------------------------------------------------------------------
=--------------------------------------------------------------------------
Adjusted EBITDA for reportable segments 2,574 8,931 85 214
=--------------------------------------------------------------------------
Amortisation (4,114) (3,088) (136) (74)
=--------------------------------------------------------------------------
Depreciation (1,435) (1,667) (47) (40)
=--------------------------------------------------------------------------
Impairment expenses - (5,145) - (123)
=--------------------------------------------------------------------------
=--------------------------------------------------------------------------
Operating loss (2,975) (969) (98) (23)
=--------------------------------------------------------------------------
=--------------------------------------------------------------------------
Gain (loss) on disposal of a subsidiary 123 (241) 4 (6)
=--------------------------------------------------------------------------
Interest income 203 494 6 12
=--------------------------------------------------------------------------
=--------------------------------------------------------------------------
Loss before tax (2,649) (716) (88) (17)
=--------------------------------------------------------------------------
5.Property, plant and equipment
Leasehold Office Total Leasehold Office Total
Improve-ments equipment Improve-ments equipment
US$'000 US$'000 US$'000 RURm RURm RURm
Cost
31 654 11,700 12,354 16 287 303
December
2007
Additions 231 1,892 2,123 6 45 51
Disposals - (12) (12) - - -
Deconsolidation (27) (227) (254) (1) (6) (7)
Classified (209) (1,233) (1,442) (5) (29) (34)
as assets
held for
sale
Currency 35 580 615 - - -
translation
30 June 684 12,700 13,384 16 297 313
2008
Additions 2 1,265 1,267 - 32 32
Disposals (72) (1,218) (1,290) (1) (29) (31)
Deconsolidation (11) (44) (55) - (1) (1)
Declassified 209 1,233 1,442 5 29 34
from
assets
held for
sale
Classified (167) (1,335) (1,502) (6) (39) (45)
as assets
held for
sale
Currency (170) (2,768) (2,938) - - -
translation
31 475 9,833 10,308 14 289 303
December
2008
Additions - 234 234 - 8 8
Disposals - (30) (30) - (1) (1)
Deconsolidation (11) (225) (236) (1) (8) (9)
Declassified 194 1,336 1,530 6 39 45
from
assets
held for
sale
Currency (42) (684) (726) - - -
translation
30 June 616 10,464 11,080 19 327 346
2009
Accumulated
Depreciation
31 500 3,989 4,489 12 98 110
December
2007
Charge 59 1,608 1,667 2 38 40
Disposals - (6) (6) - - -
Deconsolidation (14) (123) (137) (1) (3) (4)
Classified (3) (203) (206) - (5) (5)
as assets
held for
sale
Currency 24 207 231 - - -
translation
30 June 566 5,472 6,038 13 128 141
2008
Charge 51 1,453 1,504 1 37 38
Disposals (72) (1,195) (1,267) (2) (30) (32)
Deconsolidation (10) (23) (33) - - -
Declassified 3 203 206 - 5 5
from
assets
held for
sale
Classified (2) (140) (142) - (5) (5)
as assets
held for
sale
Currency (111) (1,198) (1,309) - - -
translation
31 425 4,572 4,997 12 135 147
December
2008
Charge 76 1,359 1,435 2 45 47
Disposals - (20) (20) - (1) (1)
Deconsolidation (11) (165) (176) - (5) (5)
Declassified 3 207 210 - 5 5
from
assets
held for
sale
Currency (23) (225) (248) - - -
translation
30 June 470 5,728 6,198 14 179 193
2009
Net book
value
30 June 146 4,736 4,882 5 148 153
2009
31 50 5,261 5,311 2 154 156
December
2008
6.Intangible Assets
Domain and Software and Total Domain and Software and Total
trade other trade other
names intangibles names intangibles
US$'000 US$'000 US$'000 RURm RURm RURm
Cost
31 16,673 11,147 27,820 409 274 683
December
2007
Additions - 585 585 - 14 14
Deconsolidation - (133) (133) - (3) (3)
Declassified 5,145 - 5,145 123 - 123
from
assets
held for
sale
Classified (11,798) (9,039) (20,837) (277) (213) (490)
as assets
held for
sale
Impairment (5,145) - (5,145) (123) - (123)
Currency 774 529 1,303 - - -
translation
30 June 5,649 3,089 8,738 132 72 204
2008
Additions - 899 899 - 23 23
Disposals (281) (413) (694) (7) (11) (18)
Declassified 12,410 9,038 21,448 293 212 505
from
assets
held for
sale
Classified (9,420) (7,215) (16,635) (277) (212) (489)
as assets
held for
sale
Impairment (612) (807) (1,419) (16) (21) (37)
Currency (3,482) (2,426) (5,908) - - -
translation
31 4,264 2,165 6,429 125 63 188
December
2008
Additions - 336 336 - 11 11
Deconsolidation - (422) (422) - (14) (14)
Declassified 9,420 7,215 16,635 277 212 489
from
assets
held for
sale
Currency (835) (580) (1,415) - - -
translation
30 June 12,849 8,714 21,563 402 272 674
2009
Accumulated
Amortisation
31 1,792 2,255 4,047 44 55 99
December
2007
Amortisation 1,370 1,718 3,088 33 41 74
expense
Classified (2,163) (2,872) (5,035) (51) (67) (118)
as assets
held for
sale
Currency 97 139 236 - - -
translation
30 June 1,096 1,240 2,336 26 29 55
2008
Amortisation 181 245 426 4 6 10
expense
Disposed (81) (315) (396) (2) (9) (11)
accumulated
amortisation
Declassified 2,783 2,872 5,655 67 67 134
from
assets
held for
sale
Classified (1,727) (2,270) (3,997) (51) (67) (118)
as assets
held for
sale
Impairment (620) (283) (903) (16) (7) (23)
Currency (668) (829) (1,497) - - -
translation
31 964 660 1,624 28 19 47
December
2008
Amortisation 1,803 2,311 4,114 59 76 135
expense
Deconsolidation - (362) (362) - (12) (12)
Declassified 1,727 2,271 3,998 51 67 118
from
assets
held for
sale
Currency (62) (74) (136) - - -
translation
30 June 4,432 4,806 9,238 138 151 289
2009
Net book
value
30 June 8,417 3,908 12,325 264 121 385
2009
31 3,300 1,505 4,805 97 44 141
December
2008
7.Goodwill
Goodwill Goodwill
US$'000 RURm
31 December 2007 18,416 452
Classified as assets held for sale (18,508) (434)
Currency translation 855 -
30 June 2008 763 18
On acquisition from minority shareholder 2,963 69
Declassified as assets held for sale 18,508 434
Classified as assets held for sale (14,777) (434)
Currency translation (4,483) -
31 December 2008 2,974 87
Declassified as assets held for sale 14,777 434
Currency translation (1,084) -
30 June 2009 16,667 521
Goodwill amount is detailed below:
1H 2009 2008 1H 2009 2008
=---------------------------------------------------------------------
US$'000 US$'000 RURm RURm
=---------------------------------------------------------------------
=---------------------------------------------------------------------
Lenta.ru 481 512 15 15
=---------------------------------------------------------------------
Price.ru 2,312 2,462 72 72
=---------------------------------------------------------------------
Begun.ru ( classified as asset held 13,874 - 434 -
for sale at 31 December 2008)
=---------------------------------------------------------------------
=---------------------------------------------------------------------
16,667 2,974 521 87
=---------------------------------------------------------------------
Goodwill is tested for impairment annually at year end or whenever there is any indication of impairment. At 30 June 2009, there was no indication of impairment of goodwill.
Intangible assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable.
In 1H 2009, the Company ceased to classify Begun as an asset held for sale due to the lack of potential buyers for the entity. For additional information refer to Note 20.
There was no indication of impairment of other intangible assets at 30 June 2009.
8.Investments in associates
On 1 April 2008 the Company sold a 51% stake in RGL Holding Limited which owns 100% of ZAO Index20 to a subsidiary of Video International Group.
2009 2009
US$'000 RURm
Carrying amount at 1 January 504 15
Share of profit of an associate 117 4
Dividends received (228) (8)
Currency translation (39) -
Carrying amount at 30 June 354 11
9.Other non-current assets
As at 30 June 2009 other non-current assets include a long-term deposit for the rent of office premises valued at US$1,017 thousand ( RUR 32 million).
10.Share Capital
The share capital of the Company at the balance sheet date is comprised as follows:
2009 2008 2009 2008
US$'000 US$'000 RURm RURm
Authorised ordinary shares of US$ 200 200 6 6
0.01 each (20 million shares)
Issued and fully paid share 130 138 4 4
capital 15,397,649ordinary
shares of US$ 0.01 each
There were no employee share options exercised during the first half of 2009 and 2008.
11.Share based payments
On 18 October 2004, at an Extraordinary General Meeting, the Shareholders of the Company approved the grant of options pursuant to the Rambler Media Limited Share Option Plan and the Rambler Media Limited Executive Share Option Plan (the "Share Option Plans"). Under the terms approved, directors of the Company may not allot more than 1,300,000 shares to the Share Option Plans without further approval by ordinary resolution of the Company in general meeting.
Number Weighted Total Weighted Total
average proceeds average proceeds
exercise received exercise receivedand
prices, USD and prices, RUR receivable,
receivable, thousand RURm
USD'000
=--------------------------------------------------------------------------
=--------------------------------------------------------------------------
Balance at 31 50,000 34.10 1,705 1 53
December
2008
=--------------------------------------------------------------------------
New awards - - -
=--------------------------------------------------------------------------
Exercised - - -
=--------------------------------------------------------------------------
Balance at 30 50,000 34.10 1,705 1 53
June 2009
=--------------------------------------------------------------------------
The estimated fair value of each share option granted was calculated by applying a Black-Scholes option pricing model.
12.Other provisions for liabilities and changes
Movements in Other Provisions for Liabilities and Charges are as follows:
US$'000 RURm
=-----------------------------------------------------
=-----------------------------------------------------
Carrying amount at 31 December 2008 4,208 124
=-----------------------------------------------------
=-----------------------------------------------------
Additions charged to profit or loss 1,100 36
=-----------------------------------------------------
Declassified from liabilities directly 6,316 186
associated with assets held for sale
=-----------------------------------------------------
Currency translation (579) -
=-----------------------------------------------------
=-----------------------------------------------------
Carrying amount at 30 June 2009 11,045 346
=-----------------------------------------------------
All of the above provisions relate to potential liabilities for taxes other than income taxes, and associated balances arising from the legal structure of the Group and the jurisdictions in which various income and expense items are recorded and where they may be deemed to be assessed for tax purposes. These issues are also impacted by the absence of group relief between various entities in the Group structure.
13.Revenue
Revenue comprises:
1H 2009 1H 2008 1H 2009 1H 2008
US$'000 US$'000 RURm RURm
Display / Banner advertising 13,097 20,481 432 490
Paid Search / Contextual advertising 12,659 23,195 419 554
User generated payments 2,839 4,301 94 103
Listing fees 1,805 2,982 60 71
Other Revenue 412 745 14 18
30,812 51,704 1,019 1,236
Certain comparative information, presented in the financial statements for the period ended 30 June 2008, has been reclassified in order to achieve consistency with current period presentation.
Changes in the classification on the consolidated income statement for the 6 months ended 30 June 2008 are detailed below:
As previously Reclassification Adjusted amount
reported
US$'000 US$'000 US$'000
Display / Banner 21,702 (1,221) 20,481
advertising
User generated - 4,301 4,301
payments
Mobile and Value 3,080 (3,080) -
Added Services
RURm RURm RURm
Display / Banner 519 (29) 490
advertising
User generated - 103 103
payments
Mobile and Value 74 (74) -
Added Services
14.Operating expenses
Operating expenses comprise:
1H 2009 1H 2008 1H 2009 2009 1H 2008
US$'000 US$'000 RURm RURm
Labour 10,467 15,279 346 365
Traffic acquisition 4,884 7,571 162 181
cost - contextual
Amortisation 4,114 3,088 136 74
Legal and professional 2,282 1,285 75 31
Commissions - banner sales 2,042 3,020 68 72
Traffic Acquisition Cost - 1,729 2,564 57 61
banner and revenue sharing
User generated payments costs 1,552 2,874 51 69
Marketing and advertising 1,446 2,908 48 70
Depreciation 1,435 1,667 47 40
Data center costs 1,311 1,288 43 31
Provision for taxes other 1,100 1,646 36 39
than income tax
Content costs 1,075 587 36 14
Rent - min lease payments 961 1,167 32 28
General expenses 794 1,842 26 43
Share options vested 17 39 1 1
Other - 237 - 6
Foreign currency translation (1,305) 753 (43) 18
(gain) loss
Total Operating expenses 33,904 47,815 1,121 1,143
Certain comparative information, presented in the financial statements for the period ended 30 June 2008, has been reclassified in order to achieve consistency with current period presentation.
Changes in the classification on the consolidated income statement for the 6 months ended 30 June 2008 are detailed below:
As previously reported Reclassification Adjusted amount
US$'000 US$'000 US$'000
Commissions - 3,633 (613) 3,020
banner sales
User generated - 2,874 2,874
payments costs
Mobile costs 2,261 (2,261) -
RURm RURm RURm
Commissions - 87 (15) 72
banner sales
User generated - 69 69
payments costs
Mobile costs 54 (54) -
15.Minority interest
Begun Others Total equity Begun Others Total equity
US$'000 US$'000 US$'000 RURm RURm RURm
As - 28 28 - 1 1
at 1 January
2009
Loss for (1,365) - (1,365) (45) - (45)
the
period
Disposal - (6) (6) - - -
of
minority
interest
Minority (308) - (308) (9) - (9)
directly
associated
with
assets
held
for sale
Currency (59) (2) (61) - - -
translation
As at 30 (1,732) 20 (1,712) (54) 1 (53)
June
2009
16.Income taxes
The Rambler Group has operations in a number of jurisdictions and is consequently exposed to the fiscal regimes of more than one country. Its main exposure is to the fiscal regime of the Russian Federation.
Income taxes have been provided for in the consolidated financial statements in accordance with Russian legislation enacted or substantively enacted by the balance sheet date. The income tax charge/benefit comprises current tax and deferred tax and is recognised in the consolidated income statement unless it relates to transactions that are recognised, in the same or a different period, directly in equity.
Income tax comprised the following:
1H 2009 1H 2008 1H 2009 1H 2008
=----------------------------------------------------------------------
US$'000 US$'000 RURm RURm
=----------------------------------------------------------------------
=----------------------------------------------------------------------
Current tax expense 1,079 2,217 35 53
=----------------------------------------------------------------------
Deferred tax benefit (1,674) (2,476) (55) (59)
=----------------------------------------------------------------------
Income tax benefit for the period (595) (259) (20) (6)
=----------------------------------------------------------------------
A reconciliation between the expected and the actual taxation charge is provided below:
1H 2009 1H 2008 1H 2009 1H 2008
=--------------------------------------------------------------------------
US$'000 US$'000 RURm RURm
=--------------------------------------------------------------------------
=--------------------------------------------------------------------------
Accounting loss before taxation (2,649) (716) (88) (17)
=--------------------------------------------------------------------------
Theoretical tax benefit at statutory (530) (172) (18) (4)
rate of 20% (2008: 24%)
=--------------------------------------------------------------------------
Tax effect of items which
are not deductible
or assessable for taxation purposes:
=--------------------------------------------------------------------------
Non-deductible expenses 98 108 3 3
=--------------------------------------------------------------------------
Non-deductible provisions for 220 395 7 10
taxes other than on income
=--------------------------------------------------------------------------
Revenue generated in tax (533) (1,530) (18) (37)
free jurisdictions
=--------------------------------------------------------------------------
Loss accumulated in tax 932 1,353 32 32
free jurisdictions
=--------------------------------------------------------------------------
Use of estimated annual (882) (1,117) (29) (27)
effective tax rate
=--------------------------------------------------------------------------
Additional charges for income 100 704 3 17
tax in connection
with the group's structure
=--------------------------------------------------------------------------
(65) (87) (2) (2)
=--------------------------------------------------------------------------
Income tax benefit for the period (595) (259) (20) (6)
=--------------------------------------------------------------------------
Income tax benefit is recognized based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the year to 31 December 2009 is 22.5% (1H 2008: 36.4%).
17.Earnings/(loss) per share
Earnings/(loss) per share has been calculated as follows:
1H 2009 1H 2008 1H 2009 1H 2008
=----------------------------------------------------------------------
US$'000 US$'000 RURm RURm
=----------------------------------------------------------------------
(Loss)/profit for the period (689) 756 (23) 18
from continuing
operations attributable
to equity holders
=----------------------------------------------------------------------
=----------------------------------------------------------------------
Weighted average number of shares 15,398 15,398 15,398 15,398
in issue (thousands) - basic
=----------------------------------------------------------------------
Weighted average number of shares 15,398 15,398 15,398 15,398
in issue (thousands) - diluted
=----------------------------------------------------------------------
=----------------------------------------------------------------------
Basic (loss)/earnings per (0.045) 0.049 (1.49) 1.17
share from continuing
operations (expressed
in US$/RUR per share)
=----------------------------------------------------------------------
Diluted (loss)/earnings per (0.045) 0.049 (1.49) 1.17
share from continuing
operations (expressed
in US$/RUR per share)
=----------------------------------------------------------------------
18.Disposal of a subsidiary
On 2 April 2009, the Group sold a 100% stake in its mobile value added services business SMX Communications Ltd. to a mobile content provider Plastic Media for US$50 thousand.
Details of the sale are as follows:
US$'000 RURm
Total net assets 146 5
Total purchase consideration 50 2
Less: cash balance disposed of (5) -
Outflow of cash on sale 45 2
Loss on sale (96) (3)
19.Directors' Remuneration
The directors' remuneration for 2009 and 2008 paid by Group companies are as follows (not in thousands):
1H 2009 1H 2008 1H 2009 1H 2008
US$ US$ RURm RURm
Olga Turisheva 50,409 - 2 -
Nikita Serguienko 91,310 - 2 -
Robert Mott Brown III 85,359 58,987 3 1
Mark Opzoomer 319,951 291,462 11 7
Arthur Akopyan - 177,116 - 4
Total Short term employee benefits 547,029 527,565 18 12
20.Non-current assets held for sale (or disposals groups)
On 30 June 2008, the Company met the criteria of IFRS 5 to classify the Begun business as an asset held for sale. A plan to sell the business was approved in 2008 due to the necessity to establish a prosperous partnership with Google but the transaction was declined by Russian anti-monopoly authorities (FAS) in October 2008. Management decided to continue with an approved plan to sell Begun and to initiate an active programme to locate an interested buyer of the Group's 50.1% stake in Begun. Begun therefore continued to be classified as held for sale at 31 December 2008. In 1H2009, the Company ceased to classify Begun as an asset held for sale due to continued absence of potential buyers for the entity.
Major classes of non-current assets classified as held for sale (or disposal groups) are:
1H 2009 2008 1H 2009 2008
=----------------------------------------------------------------
US$'000 US$'000 RURm RURm
=----------------------------------------------------------------
=----------------------------------------------------------------
Property, plant and equipment - 1,360 - 40
=----------------------------------------------------------------
Intangible assets - 12,640 - 371
=----------------------------------------------------------------
Goodwill - 14,777 - 434
=----------------------------------------------------------------
Deferred tax asset - 507 - 15
=----------------------------------------------------------------
Trade and other receivables - 1,299 - 38
=----------------------------------------------------------------
Cash and cash equivalents - 4,075 - 120
=----------------------------------------------------------------
=----------------------------------------------------------------
- 34,658 - 1,018
=----------------------------------------------------------------
Major classes of liabilities directly associated with non-current assets (or disposal groups) classified as held for sale are:
1H 2009 2008 1H 2009 2008
=---------------------------------------------------------------
US$'000 US$'000 RURm RURm
=---------------------------------------------------------------
=---------------------------------------------------------------
Deferred income tax liability - 2,957 - 87
=---------------------------------------------------------------
Other taxes payable - 6,316 - 185
=---------------------------------------------------------------
Trade and other payable - 9,257 - 272
=---------------------------------------------------------------
=---------------------------------------------------------------
- 18,530 - 544
=---------------------------------------------------------------
21.Contingent liabilities
(a)Russian taxation and currency control regulations
In addition to the possible attribution of additional tax to the Group's companies described in Note 12, management estimates that at 30 June 2009 the Group has other possible obligations from exposure to other than remote tax risks of US$4,667 thousand (RUR 146 million) and at 31 December 2008: US$4,821 thousand (RUR 142 million).
(b) Litigation
In the course of its normal business the Rambler Group receives legal claims from time to time. In the opinion of the directors none of the litigation currently in progress is likely to result in the crystallisation of a material liability.
(c) Commitment to pay for exclusive internet partnership
An agreement was signed on 8 December 2004 by the Rambler Group that commits it to paying a minimum amount per quarter in respect of an internet partnership to promote a customised co-branded instant messaging product for Russian and other CIS countries.
2009 2008 2009 2008
=---------------------------------------------------------
US$'000 US$'000 RURm RURm
=---------------------------------------------------------
=---------------------------------------------------------
Expiring within one year 2,279 3,000 71 88
=---------------------------------------------------------
Expiring from 1 to 5 years 1,312 3,000 41 88
=---------------------------------------------------------
(d) Lease commitments
The Group is committed to the following lease payments under the non-cancellable operating leases:
2009 2008 2009 2008
=---------------------------------------------------------
US$'000 US$'000 RURm RURm
=---------------------------------------------------------
=---------------------------------------------------------
Expiring within one year 2,669 1,267 84 37
=---------------------------------------------------------
Expiring from 1 to 5 years 6,945 671 217 20
=---------------------------------------------------------
22.Related-Party Transactions
Transactions between Rambler Companies and its related parties, as well as related party balances are not material for the period ended 30 June 2009 except for the following parties:
2009 2009
=--------------------------------------------------------------------
US$'000 RURm
=--------------------------------------------------------------------
FINAM Bank (related to Begun's minority shareholder)
=--------------------------------------------------------------------
Cash at the beginning of the period - bank account 932 27
=--------------------------------------------------------------------
Cash at the period end - bank account 1,288 40
=--------------------------------------------------------------------
=--------------------------------------------------------------------
IMHO (majority shareholder of Index20)
=--------------------------------------------------------------------
Balance receivable at the beginning of the period 5,045 148
=--------------------------------------------------------------------
Agent sales 9,050 301
=--------------------------------------------------------------------
Agent commission charge (1,610) (54)
=--------------------------------------------------------------------
Cash inflows (net) during the period 8,588 285
=--------------------------------------------------------------------
Currency translation (381)
=--------------------------------------------------------------------
Balance receivable at the period end 3,516 110
=--------------------------------------------------------------------
23.Post Balance Sheet Events
There were no material events after the balance sheet date which affect the financial statements as at 30 June 2009.
24.Seasonality
The internet advertising volume of sales is subject to certain seasonal fluctuations, the second half of the year is typically higher than the first half due to holiday seasons. For the six months ended 30 June 2009 sales volume was affected by both seasonality and ongoing global financial and economic crisis and it represented in USD terms 28% (six months ended 30 June 2008: 47%) and in Roubles terms 37% (six months ended 30 June 2008: 44%) of the annual sales in the year ended 31 December 2008. The decrease in sales volume in USD terms in 1H 2009 was as well highly impacted by the Russian Rouble significant depreciation against US dollar.
Statements of directors' responsibility
The directors' confirm that this condensed set of financial statements has been prepared in accordance with IAS 34.
The directors of Rambler Media Limited are listed in Rambler Media's Annual Report for 31 December 2008. A list of current directors is maintained on Rambler Media Limited's corporate website at www.ramblermedia.com.
Olga Turisheva, CEO
26 August 2009
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